Finding Text
Finding 2025-002 U.S. Department of Health and Human Services ALN: 93.493 Congressional Directed Spending for Construction Projects ALN: 93.526 Grants for Capital Development in Health Centers I - Procurement and Suspension and Debarment Condition: During testing of procurement transactions subject to federal compliance requirements, we noted the Organization did not consistently follow its documented procurement policy. Specifically, for the seven transactions tested, management was unable to provide documentation supporting the procurement process performed, including evidence of competitive bids, vendor selection procedures, or other records demonstrating compliance with the procurement requirements outlined in its policy. Criteria: Per 2 CFR section 200.318(a), non-Federal entities must use and follow documented procurement procedures that are consistent with applicable Federal statutes, regulations, and the terms and conditions of Federal awards. Additionally, 2 CFR section 200.320 through 200.327 require entities to maintain documentation supporting the procurement method used, including the basis for contractor selection and evidence of required competition when applicable. The Organization's procurement policy requires the solicitation and retention of competitive bids for purchases exceeding established thresholds. Cause: Management did not consistently adhere to established procurement procedures and did not maintain adequate documentation to demonstrate that required competitive procurement activities were performed. In addition, controls over the retention of procurement documentation were not operating effectively to ensure compliance with federal procurement requirements and the Organization's procurement policy. Effect: Without adequate documentation of the procurement process and competitive bidding requirements, the Organization cannot demonstrate compliance with Uniform Guidance procurement requirements. As a result, federal funds may have been expended in a manner that does not ensure full and open competition or may be subject to questioned costs by federal awarding agencies. Recommendation: We recommend that management strengthen internal controls over procurement activities by (1) ensuring procurement procedures are consistently followed for all federally funded purchases; (2) retaining documentation supporting the procurement method utilized, including competitive bids, quotes received, bid evaluations, vendor selection decisions, and contract approvals; (3) implementing a review process to verify procurement documentation is complete and maintained before expenditures are approved; and (4) providing training to personnel responsible for purchasing activities regarding Uniform Guidance procurement requirements and the Organization's procurement policy. View of Responsible Officials: Management acknowledges the finding and agrees that documentation supporting compliance with procurement requirements was not consistently retained. For the seven disbursements selected for testing, management had established longstanding relationships with the vendors utilized and, in several instances, there were a limited number of vendors capable of providing the specialized equipment and services acquired for the project. Management indicated that procurement procedures were performed during the vendor selection process, including obtaining and evaluating quotes, discussing vendor alternatives, and visiting other healthcare organizations to assess the quality and suitability of certain products before making purchasing decisions. However, many of these activities occurred several years earlier, at the outset of the construction project, and supporting documentation was not maintained in accordance with the Organization's procurement policy and federal documentation requirements. Management agrees with the finding and will implement procedures to ensure procurement activities are conducted and documented in accordance with the Organization's procurement policy and Uniform Guidance requirements. Corrective actions will include establishing a centralized procurement file, providing additional training to personnel responsible for purchasing activities, and implementing supervisory review procedures to ensure that competitive procurement and documentation requirements are consistently met and appropriately retained.